The History of Social Business & Social Entrepreneurship29 Oct 2013/0 Comments/in Knowledge
The Birth of Grameen Bank and the Social Business Movement
The rise of the successful concept of social business began with Prof. Muhammad Yunus and a small amount of money, worth about $27 in the mid 1970s.
We write around the year 1976, Muhammad Yunus, a professor in economics, has been appointed head of the Economics department and professor at the University of Chittagong, Bangladesh. A terrible famine raged across the country at the time, causing Yunus to feel less and less at ease teaching sophisticated economic models, while his countrymen were dying outside the university gates. Feeling the urge to help Yunus resolved to leave the safe confinement of the Chittagong campus and visited the nearby village of Jobra with a mission to make himself useful by helping at least one person there each day.
While in the village, Yunus became aware of an appalling practice that was taking place there; loan-sharks loaned many to the poor villagers, who had no other sources of credit, at very high interest rates of 25% or even 100% at times, while adding restrictions that stated that any person who took such a loan was obligated to sell some, or all, of their produce at a fixed price to the loan-shark. The low income of the villagers, combined with the extreme interest rates, caused anyone taking such loans to fall into a perpetual circle of debt and poverty, binding them to these loan-sharks in a way that can best be described as modern slavery.
Yunus, upset by what he saw set out to document the number of people in the village who had taken such loans and took note of the size of their individual debt. When he had finished his inquiries he added up the loans and found out that the size of all the loans involving the villagers had a total sum that was equivalent to no more than $27.
Staying true to his resolution to help the villagers Yunus paid the money out of his own pocket, releasing the villagers from their financial burden.
Yunus’ actions created a wave of gratitude and happiness from the villagers, who felt that they were repaid with their freedom to make their own choices once again. Yunus was amazed with the amount of happiness and joy that he was able to bring about with so little money, and started to think about ways to further his initiative. This resulted in the birth of microcredit, the extension of financial loans to the poorest people of Bangladesh without collateral, and the social business movement. The initiative took shape by multiplying the micro-credit concept, applying it to more and more people and led to the creation of Grameen bank (village bank) in 1983, the world’s first bank devoted to servicing the poorest people in society. (Yunus, 2010)
Grameen bank operated using a groundbreaking business model, which provided those people in the lowest regions or even those at the bottom of the economic pyramid with micro-credits to help them set-up independent self-sustaining businesses that allowed them to provide a source of income for themselves and their families. These loans were provided under fair conditions, fitting the economic situation of these people, without a requirement for collateral to manage the risk on these loans. (Social Business Tour 2010; )
Grameen Bank and Social Business Today
Now, more than thirty years later, Grameen bank provides credit to more than 8 million customers through more than 2500 branches all throughout Bangladesh and provides credits worth around $100 million every month, with a total volume of $9.9billion in loans over it’s history ().
The bank has led the way in a paradigm shift that led to rise of the social business movement and many social business initiatives all over the world. Grameen bank has set the stage for social business today as a socially conscious, sustainable business, maximizing benefits to its beneficiaries and society, rather than profit. Surplus profits are invested back into the business and used to maximize these benefits and finance new sustainable initiatives.
The Growth of Social Business across Industries and Sectors
The enormous success of the social business concept created a platform for Yunus, usually through partnerships or joint ventures with existing traditional profit-maximizing businesses, to develop a wide variety of social businesses, aiming to solve social issues ranging from nutritional deficiencies in poor children, to lack of telecommunications amongst village inhabitants and a lack of affordable footwear for the poor. Some good examples can be found here.
His ideas have been a source of inspiration fueling social business initiatives far outside of the borders of Bangladesh, and have created attention for social business world wide. Following the wave of successes and attention for his work, Muhammad Yunus has received many awards from all over the world, including the Nobel peace price and the American ‘Presidential Medal of Freedom’ in 2009 ().
You can find more information about the social business initiatives and work of the Grameen group and of Prof. Yunus at: www.muhammadyunus.org
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